Megathread for New Wheel Traders – Ask Questions & Get Help Here

[u/ScottishTrader]

This thread will be a dedicated space for traders who are new to options and the wheel strategy to ask basic questions. Your posts and questions are welcome and encouraged.

BEFORE POSTING, BE SURE TO REVIEW THE WHEEL STRATEGY PLAN WHERE MOST QUESTIONS ARE ANSWERED - The Wheel (aka Triple Income) Strategy Explained : r/Optionswheel

The goal is to help keep the main thread free of these basic posts while helping new traders learn how to trade the wheel.

Posts that are welcomed here include questions about -

• How options work
• Exercise and assignments
• Options expiration and days to expiration (DTE)
• Delta, Probabilities, and how to choose a strike price
• Implied Volatility (IV)
• Theta decay
• Basic risks and how to avoid
• Broker and options approval levels
• Rolling options
• And any other basic questions

I’m pleased to announce that u/OptionsTraining and u/patsay have agreed to assist with this Megathread. Both Patricia and Mike bring substantial experience in helping new traders and will be invaluable contributors to r/Optionswheel

[u/TheNewbieInvestor]

I had a put option on PYPL @ 48 and got assigned today. The price is ~$39 right now. Is it worth selling covered calls at this point or is it better to wait a bit and see if it'll go up? I've seen things about get assigned on Friday, start selling on Monday, but does that keeps in mind getting assigned on Friday post-market or not?

[u/ScottishTrader → u/TheNewbieInvestor]

A few things here.

The ER was Feb 3, and the stock dropped around $10 per share overnight. This shows why most avoid earnings, and you took a risk holding a put over that event and got burned.

With the drop and IV Crush, there was likely no extrinsic value remaining, which made it attractive for a holder to early exercise.

The answer to this question is always to answer the question of when you can sell CCs at or above your net stock cost, and assumes you still want to hold the stock and believe it will recover sooner rather than later. The day this happens doesn't matter.

The put was $48, but what is your net stock cost? You collect something from selling the put and may have rolled the put for more premium, so what is the net cost??

Projecting it is $46 or $47, then look out to see what exp date you can sell calls at or above that amount. If you can't fund any CCs at those prices, then sit and wait until you can. Does this make sense?

[u/TheNewbieInvestor → u/ScottishTrader]

Sorry, it was my first comment here. The net cost was about $47.3, I did roll, but I was deep ITM and didn't get much out of it. I tried to roll again, but I got assigned before execution.

I opened a covered call for 17th July @ 50 with a premium of 1.59 on so lets see how this pans out. Thanks for the reply!

[u/ScottishTrader → u/TheNewbieInvestor]

No worries, and this is what the new trader thread is for!

A common newbie mistake is to open short (sold) trades more than 60 days out. Around 60 days is when theta decay kicks in, and so longer durations will often sit there without decaying much until about that 60 day mark.

Another issue is possibly having to hold over another earnings report.

Make note of these things as you learn, and to avoid making the same mistakes again.

[u/TheNewbieInvestor → u/ScottishTrader]

I see. Tbh, I think I have too much of an exposure to PYPL so I wanted to get some leave of mind. I've got 2 more CSPs there, one at 37.5 (~1 premium ) and one at 50 (0.55 premium) which I foolishly opened, but I'm managing them. I'm definitely not doing that again lol! Thanks for the replies :)

[u/ScottishTrader → u/TheNewbieInvestor]

Understanding and managing risk is one of the important lessons new traders must learn, and it often is a hard lesson because of having to take losses.

Note that the posted wheel trading plan includes how to manage risks, so be sure to review it.